Anglo American shares close at lowest in 16 years on HSBC note

Anglo American shares close at lowest in 16 years on HSBC note

Anglo American sold the Mantos Blancos copper mine in Chile (pictured) earlier this year.

Shares in Anglo American (LON:AAL), the second-worst performer in the FTSE 100 after Glencore this year, plummeted Wednesday, after HSBC downgraded it to 'reduce' from 'hold' and highlighted the miner’s precarious cash flow situation may force it to cancel its dividend.

The diversified miner’s stock closed down 7.7% to 417.2 pence, the lowest level since the company listed in London in 1999. The fresh drop means that Anglo has lost over 65% of its value this year.

HSBC said that before further capex cuts, Anglo would likely burn at least $2.7 billion next year on spot prices to maintain the dividend.

"We see high likelihood of a zeroed dividend (now in our numbers), which saves $1.1bn cash annually," the report said.

Anglo American shares close at lowest in 16 years on HSBC note

Source: Google Finance.

The bank said it expects more near-term pain, with no "clarity on long-term resolution to reverse potential cash burn" at current commodity prices, according to Bloomberg.

The company’s chief executive, Mark Cutifani, said earlier this year that he was ready to push the button on selling more assets — potentially cutting into parts of its business that Anglo might otherwise prefer to retain — to keep to a target of $3 billion in proceeds from disposals.

The miner has already raised about $2 billion this year by offloading two copper operations in Chile, four platinum mines and some coal assets in South Africa, as well as coal interests in Australia. About $1.6 billion came from the sale of its 50% stake in Lafarge-Tarmac.